Saving for a down payment is often the biggest hurdle on the path to homeownership in Canada. With rising property prices, building a solid down payment requires a plan. Here are eight strategies to help you reach your goal faster, from government programs to smart budgeting.

1. Set a Down Payment Goal and Timeline

Start by determining how much you need for a down payment. In Canada:

• Homes under $500,000 require a minimum down payment of 5%.
• For homes between $500,000 and $999,999, you’ll need 10% on the portion above $500,000.
• Properties priced at $1 million or more require at least 20%.

Knowing your target amount allows you to set a savings timeline. Automate regular deposits into a dedicated down payment account, which can simplify saving and keep you on track.

2. Utilize the First Home Savings Account (FHSA)

The First Home Savings Account (FHSA) is a relatively new option that combines the tax benefits of an RRSP with the flexibility of a TFSA. Here’s how it works:

• Annual Contribution Limit: Up to $8,000 per year.
• Lifetime Limit: $40,000.
• Tax Benefits: Contributions are tax-deductible, and withdrawals for a first home are tax-free.

This unique combination of tax-free growth and tax-deductible contributions makes the FHSA one of the best tools for saving for a down payment.

3. Use the Home Buyers’ Plan (HBP) with Your RRSP

Under the Home Buyers’ Plan (HBP), first-time homebuyers can withdraw up to $35,000 from their RRSP tax-free. Here’s how it works:

• Repayment: You’ll repay the amount over 15 years, with missed payments added to your taxable income for that year.
• Benefit: Contributing to an RRSP now gives you a tax deduction, and later, you can withdraw it under the HBP when you’re ready to buy.

Combine the HBP with the FHSA to maximize your tax benefits and reach your down payment goal sooner.

4. Save with a Tax-Free Savings Account (TFSA)

A Tax-Free Savings Account (TFSA) lets you grow your money tax-free and withdraw it without paying taxes, making it perfect for down payment savings. Unlike RRSPs, TFSAs have no repayment requirement, so you can pair them with the HBP for flexibility.

• Pro Tip: Set up automatic monthly contributions. Investing in low-risk options within your TFSA, like high-interest savings or conservative ETFs, can grow your funds with minimal risk.

5. Explore Provincial and Local Down Payment Assistance Programs

Some provinces and municipalities offer assistance programs to help first-time buyers meet down payment requirements. For example:

• BC Home Owner Mortgage and Equity Partnership: Provides matching down payment loans for eligible buyers.
• Toronto Home Ownership Assistance Program: Offers forgivable loans to qualified applicants.

Be sure to research the programs available in your area, as they can provide valuable support toward home ownership.

6. Apply for Government Grants and Rebates

Take advantage of government incentives designed to make home-buying more affordable:

• First-Time Home Buyer Incentive: A shared equity mortgage with the government contributing 5% or 10% of the purchase price. This reduces your monthly payments, although you’ll need to repay the same percentage of your home’s value when you sell or after 25 years.
• GST/HST Rebate: Available for new or significantly renovated homes, this rebate can offset some purchase costs.

These grants and rebates reduce upfront costs, freeing more money for your down payment or moving expenses.

7. Cut Non-Essential Expenses and Boost Savings

A down payment savings plan should include both building income and reducing spending:

• Budgeting: Create a list of essential versus non-essential expenses. Trim the non-essentials and redirect the savings to your down payment fund.
• Extra Income: Take on freelance work, side gigs, or monetize a hobby to accelerate your savings. Every bit helps!

This strategy keeps your lifestyle in check while adding to your down payment fund.

8. Consider Gifted Down Payments from Family

Many lenders allow down payments gifted by family, provided no repayment is expected. This can be a practical option for first-time buyers, especially with rising home prices.

• Documentation: Lenders typically require a letter confirming that the funds are a gift with no expectation of repayment. Gifted down payments can supplement your savings, bringing homeownership closer.